Here's a good reliable leading economic proxy indicator that doesn't
get enough credit. I can guess when any market has topped out and is
set to collapse, when late night TV hucksters try to sucker in the next
group of suckers, the unwitting general public to invest. Six months
ago, it was the stock market and day trading. Now it's commercial real
estate--a "safe security" and "a sure-fire bet", according to the
commentator. How can an investor lose or go wrong?

A Yahoo story on Friday & an earlier mention in the Washington
Post notes the following risks and sequence of collapsing domino's:

"Black Friday's retail shoppers hunting for holiday bargains (in
the USA) won't be enough to stave off what's likely to become the next economic crisis."

"Malls from Michigan to Georgia are entering foreclosure, commercial victims of the same events poisoning the housing market."

"Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages."

... a report this week about delinquent payments on two
high-profile loans -- one for a California shopping center and the
other for two Westin resorts in Arizona and South Carolina -- stirred
fears about whether an era of rosy business projections and loose
lending standards will, like the residential market, give way to missed
mortgage payments and a tough refinancing environment."

"That pace is expected to quicken. The number of late payments and defaults will double, if not triple, by the end of next year, according to analysts from Fitch Ratings Ltd., which evaluates companies' credit."We're probably in the first inning of the commercial mortgage problem."

"that's bad news for more than just property owners. When
businesses go dark, employees lose jobs. Towns lose tax revenue. School
budgets and social services feel the pinch."

"In the past, when businesses hit rough patches, owners
negotiated with banks or refinanced their loans.But many banks no
longer hold the loans they made. Over the past decade, banks have
increasingly bundled mortgages and sold them to investors.Pension funds, insurance companies, and hedge funds bought the seemingly safe securities and are now bracing for losses that could ripple through the financial system."

"Unlike home mortgages, businesses don't pay their loans over 30 years. Commercial mortgages are usually written for five, seven or 10 years with big payments due at the end. About $20 billion will be due next year (in the USA),
covering everything from office and condo complexes to hotels and
malls. The retail outlook is particularly bad.Those retailers typically
were paying rent that was expected to cover mortgage payments. When those $20 billion in mortgages come due next year — 2010 and 2011 totals are projected to be even higher
— many property owners won't have the money. [...] Refinancing formerly
was an option, but many properties are worth less than when they were
purchased. And since investors no longer want to buy commercial
mortgages, banks are reluctant to write new loans to refinance those
facing foreclosure.

Which US States could go bankrupt?

"California,New York, Texas and Florida — states with a
high concentration of mortgages in the securities market, according to
Fitch — are particularly vulnerable. Texas and Florida are already seeing increased delinquencies and defaults, as are Michigan, Tennessee and Georgia.

The worst-case scenario goes something like this:

"With banks unwilling to refinance, a shopping center goes into
foreclosure. Nobody can buy the mall because banks won't write
mortgages as long as investors won't purchase them.

"Credit markets have seized up," corporate securities lawyer
Michael Gambro said. "People are not willing to take risks. They're not
buying anything." That drives down investments already on the books.
Insurance companies are seeing their stock prices fall on fears they
are too invested in commercial mortgages.

"The system has never been tested for a deep recession," said Ken Rosen, a real estate hedge fund manager and University of California at Berkeley professor of real estate economics.

"One hope was that the U.S. would use some of the $700 billion financial bailout to buy shaky investments from banks and insurance companies. That was the original plan. But Treasury Secretary Henry Paulson has issued a stunning turnabout, saying the U.S. no longer planned to buy troubled securities.
For those watching the wave of commercial defaults about to crest, the
announcement was poorly received. "He's created havoc in the
marketplace by changing the rules," Rosen said. "It was the stupidest
statement on Earth."